Dry weather threat to power prices

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Extremely dry weather, especially in the North Island, has seen hydro power lake levels drop to 73 per cent of average, in line with levels running into the 2008 power crisis.

Lake levels have plunged from well above average at the start of the year, to well below average. That has led to wholesale power prices rising to between $100 and $150 a megawatt hour compared with $50 or less a unit when lakes were full in January.

Prices around $120 a unit typically showed the market was a bit short, but not extreme, but prices around $180 indicated market concern about the risks of a dry patch, a source said.

While demand in the upper North Island is also low due to mild Indian summer weather, one energy consultant said the picture could become a worry if lakes remained low going into winter around late May and June.

At 73 per cent, lake levels are similar to last year, which came right after rain in May, but also in line with 2008's big power crisis when people were asked to cut electricity use.

"The risk is not great [now] but it would not take too much to become a reasonable risk," independent energy consultant Bryan Leyland said yesterday.

"People should be aware lakes are low and have their fingers crossed for more rain."

While it would not take too much more extremely dry weather or a big station going down for the power system to get into trouble, "it would have to be bad luck than anything else".

"There could be a problem."

Mighty River Power, which has power stations on the Waikato River, said its storage was about 32 per cent of average. Lake Taupo is just 18cm above minimum control level out of a 1.4 metre operating range.

"Lake Taupo has had very low inflows due to an extended dry period spanning from December," Mighty River Power said yesterday. "We have been carefully managing water flows during that time, while maintaining regulated minimum flow requirements down the river."

As the lake got close to the bottom of the range, MRP would have less ability to generate hydro power for peaks in demand, another source said. "That is quite low and will start to impact on their flexibility soon."

Meanwhile, Leyland said it appeared that power companies had pulled lake levels down rapidly after heavy rain at the start of the year. Falling lake levels had seen wholesale prices move up to a level "that won't scare people off", between $100 and $150 a mwh.

But a potential winter power shortage could see wholesale prices spike even higher and see big users pay hundreds of millions more for power, as happened in 2001, Leyland said.

Another source said power companies would want to be going into winter with "100 per cent" of average storage.

Lake Manapouri was near the bottom of its operating range, and autumn could see dry conditions continue for months or suddenly get a big rainfall.

But Taupo was normally dry through the summer and got its inflows in the winter, "so to be low at this time of year is not so unusual. You want to capture as much of the rain [as possible] when it does come", the source said.

MRP said while Lake Taupo was low, it had a resilient set of stations with 40 per cent of its power geothermal. It also had two gas-fired units running at it Southdown station. So while lake levels were similar to 2008, the overall security of supply was better, with more geothermal power available.

With Lake Taupo and other lakes in the North Island especially low, Genesis Energy is running its gas-fired unit 5 and a couple of its gas and coal "Rankine" units at Huntly power station, though not at full capacity.

Genesis said it had plenty of coal stockpiled and plenty of gas to cope with demand.

Its Lake Waikaremoana hydro lake was 33 per cent full and was producing relatively little power with hydro in the North Island which was "not as rosy" as the South Island.However, Lake Tekapo in the South Island was 80 per cent full and feeding Genesis' Tekapo A & B stations, so the south was dry "but not extremely so", Genesis said.